Dec. 5 (Bloomberg) -- Fifty-five, pensionless and assuming
he’d have to work until he died, Roger Ulrich had a decision to
make. After two decades in the pharmaceutical industry, his
position at Merck & Co. had been phased out.

Instead of joining another big drug company, where he could
expect a steady income and relative job security, Ulrich took a
leap. He teamed with two partners, raised seed funding and
founded a biotechnology company, making a bet on an industry
characterized by risk.

Seven years later, his gamble has paid off. Ulrich, with
partners Mike Gallatin and Neill Giese, sold their company,
Calistoga Pharmaceuticals, in a deal worth as much as $600
million. A trial of their chronic lymphocytic leukemia drug,
idelalisib, was so positive that it was stopped early so that
patients taking the control treatment could have the option of
switching over. It’s now one of a group of drugs expected to
change the face of treating that cancer.

“When I was starting Calistoga, a lot of my colleagues who
were with big pharma thought it was a really bad idea,” Ulrich
said by phone. “They told me I was nuts.”

Ulrich’s story, and that of idelalisib, are increasingly
familiar in the world of drug development, where smaller, more
risk-friendly biotechnology companies are supplying more new
medicines, said Julian Adams, head of research and development
at cancer-drug maker Infinity Pharmaceuticals Inc. Idelalisib is
a drug that almost wasn’t, after being shelved by another
company and targeting a biological pathway nobody was sure would
work.

New Drugs

It’s now one of at least five new medicines nearing or on
the market that researchers say may change chronic lymphocytic
leukemia from a slow march to death to a manageable chronic
disease. A cancer of the blood and bone marrow, CLL is the
second-most common form of leukemia among adults; about 15,680
people in the U.S. will be diagnosed with it this year,
according to estimates from the National Cancer Institute. Life
expectancy can range from months to more than 10 years.

The new treatments, from Gilead Sciences Inc.,
Pharmacyclics Inc., Infinity, Roche Holding AG and others, will
be a focus of the annual American Society of Hematology meeting
beginning Dec. 7 in New Orleans. They’re collectively expected
to generate as much as $9 billion in annual revenue by 2020,
according to analysts’ estimates compiled by Bloomberg.

Treatments Needed

The revenue projections reflect the need for new
treatments, as well as their high pricetags. Currently available
therapies are able to slow the disease, but they don’t stop it,
said John Byrd, director of the hematology division at Ohio
State University. Further, they come with the side effects of
severe chemotherapies, and many CLL patients -- a predominantly
older population, with median age of diagnosis of 70 years --
are unable to tolerate them.

“For about the last six months, I’ve told every new
patient I’ve seen that we have agents right now that are close
to being approved that really have the potential to change the
landscape of CLL,” Byrd said by phone. “We might not cure it,
but it could be treated like we treat high blood pressure or
cholesterol. If you stay on the medicine, your disease will be
controlled and you’re going to die from something else.”

Idelalisib wasn’t always destined to treat cancer. When
Ulrich came to it with his partners, a company called Icos Corp.
had been considering the compound for asthma. The drug
ultimately got shelved as Icos directed resources elsewhere,
including to marketing its erectile dysfunction drug, Cialis.

‘Devil’s Number’

It was Gallatin, who was working with venture fund Frazier
Healthcare after retiring from leading Icos’s scientific
research, who suggested pulling it off the shelf. Frazier
provided seed funding and the group licensed the compound,
which, at the time, had the unfortunate handle “666” -- “the
devil’s number,” Gallatin recalled.

It faced other challenges than a cursed name. The drug’s
mechanism of action caused some potential investors to scratch
their heads, according to Ulrich. Like other medicines from
Infinity, Pharmacyclics and Johnson & Johnson, idelalisib is a
targeted therapy, going after a pathway important in the
signaling of B-cells, part of the immune system. It aims at a
target called PI3-kinase delta, unproven at the time to be
important in cancer.

Giese, a drug industry veteran with expertise in blood
cancers, was convinced the compound would work in B-cell
malignancies, Ulrich said. They approached more than 20 venture
capitalists, ultimately winning over enough to raise $26 million
in their first round of financing, he said.

First Response

A year and a half later, the first cancer patient responded
to the drug, at that point called CAL-101. More successes
followed. A few weeks before Christmas in 2008, Calistoga was in
a team meeting when Albert Yu, the company’s chief medical
officer, got a phone call about a patient, Gallatin said.

“This lady had failed multiple courses of the standard
care, and she wasn’t going to make it to Christmas,” Gallatin
said by phone. In a trial of CAL-101, “she had a remarkable
response. He came back with that news and there wasn’t a dry eye
in the room.”

Three years later, in April 2011, Calistoga was acquired by
Foster City, California-based Gilead, for $375 million, with the
potential for $225 million more based on future goals. In
October of this year, Gilead stopped a late-stage study of the
medicine after patients taking it with another drug, Rituxan,
survived longer without their cancer progressing than those
taking Rituxan alone. Gilead’s stock jumped the most in 11
months. Further data will be reported at the hematology meeting.

New Hope

The number of potential new treatments for CLL is giving
hope to patients with the disease, said Neil Matthews, the
administrator of an online patient support group, who was
diagnosed with small lymphocytic lymphoma five years ago at age
53 that has progressed to CLL.

Many patients are told to “watch and wait,” instead of
treating their cancer with available therapies now, and there is
cautious optimism, he said, that those days may be over. Still,
the extent the new therapies will benefit all patients, and when
the right time is to take them, aren’t necessarily clear yet, he
said.

“Many of us right now are grappling with the question of
whether to delay treatment in the hope of gaining access to a
safer, better treatment, but that brings the risk of an adverse
outcome,” Matthews wrote by e-mail. “Treatment too early or
too late both put patients at increased risk, which is why
access to an experienced specialist is essential.”

Biotech Success

Ulrich, after his gamble in leaving big pharma, joins a
group of other drug developers finding success in CLL. Robert W.
Duggan, the chief executive officer of Sunnyvale, California-based Pharmacyclics, became a billionaire on the rise of his
company’s shares; they’re up 734 percent in the last two years,
giving Pharmacyclics a market valuation of more than $9 billion.

Infinity, based in Cambridge, Massachusetts, is in earlier
stages of developing its CLL drug; its shares have risen more
than 50 percent in the last two years, though the stock has
fallen in 2013.

“About five years ago, the combined approvals at the FDA
from biotech surpassed combined approvals from pharma,”
Infinity’s Adams said, citing data from Annual Reports in
Medicinal Chemistry 2009. “That’s stayed steady and I think
it’ll never go back.”

Pharmacyclics’s drug, ibrutinib, was cleared Nov. 13 by the
U.S. Food and Drug Administration for mantle cell lymphoma, and
a decision is expected on the medicine in CLL by the end of
February. Analysts estimate it will draw $4.8 billion in annual
sales in 2020 for Pharmacyclics, the highest expectation for
drugs among the group approaching the market. Pharmacyclics is
developing the drug with New Brunswick, New Jersey-based J&J.

Analysts estimate $951.8 million in 2017 sales for Gilead’s
idelalisib, and $308 million in revenue for Infinity’s IPI-145
by 2019.

“There’s no question that all these new drugs are going to
change the way we treat CLL,” Lee Greenberger, chief scientific
officer of the Leukemia & Lymphoma Society, said by phone. “The
terrain is changing.”